Key Takeaways
On Oct. 30, the Chancellor of the Exchequer, Rachel Reeves, delivered the U.K. government’s first budget since Labour came to power.
A string of tax hikes and increased borrowing will fund Labour’s ambitious investment programs. But one area that was spared from tax rises was Electric Vehicles (EVs).
“To help drive the transition to electric vehicles,” the budget maintains tax incentives introduced by the previous government that were going to be phased out in 2025.
These include a lower rate of road tax for the first year after buying an EV and an allowance that lets businesses deduct up to 100% of the cost of EVs and charging infrastructure from their tax bill.
Alongside tax incentives to promote EV adoption, the budget commits the government to investing over £200 million in 2025-26 to accelerate the rollout of charging points, including funding for local authorities to install on-street chargers.
An additional £120 million will be provided to fund the plug-in vehicle grant scheme, which provides financial assistance to support the purchase of new electric vans and the manufacturing of wheelchair-accessible EVs.
Overall, the new budget increases public investment by more than £100 billion over the next five years. Major commitments include billions of pounds of new infrastructure investment focused on the clean energy sector.
The National Wealth Fund (NWF), which was unveiled on Oct. 14, forms a cornerstone of the government’s plans.
The new investment vehicle will replace the existing U.K. Infrastructure Bank, subsuming its £22 billion capitalization. The sovereign fund will be allocated at least an additional £5.8 billion, with the potential for this to be expanded to £7.3 billion during the current Parliament.
With a target portfolio mobilization ratio of 1:3, the fund could spur an additional £70 billion of private investment, the government said.
In its election manifesto, Labour promised the NWF would accelerate the U.K.’s transition to clean power.
The wind and solar electricity sectors are expected to be among the biggest beneficiaries of the new investment strategy as the government looks to build up the country’s renewable energy infrastructure.
Despite Reeves’ investment promises, some corners of the U.K. technology sector have already felt the impact of tightening public purse strings.
In August, the government canceled an £800 million supercomputer project and a £500 million AI research fund.
The previous government had allocated a combined £1.3 billion in research funding. However, the Department of Science, Innovation and Technology scrapped it, saying it was a “difficult and necessary” decision.
Comparing Labour’s investment plans with those of the previous government highlights their different priorities.
Former Chancellor and Prime Minister Rishi Sunak favored pro-innovation economic policies, such as tax breaks for cloud computing and £800 million for a new Advanced Research and Invention Agency.
Starmer and Reeves’ approach, on the other hand, is less oriented toward cutting-edge startups. They prefer to channel technology investment to industries such as EVs and clean energy that support manufacturing jobs and industrial development.